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"In China's thousands of years of civilization, the conflict between humanity and nature has never been as serious as it is today."—Minister of Environment Zhou Shengxian, February 2011.

What is the biggest challenge that China faces?

Corruption, the gap between the rich and poor, and the rapidly aging population often top the list of answers to this question.

Yet a closer look suggests that the greatest threat may well be lack of access to clean water. From "cancer villages" to violent protests to rising food prices, diminishing water supplies are exerting a profound and harmful effect on the Chinese people as well as on the country's capacity to continue to prosper economically.

While much of the challenge remains within China, spillover effects—such as the rerouting of transnational rivers and a push to acquire arable land abroad -- are also being felt well outside the country's borders. China's leaders have acknowledged the severity of the challenge and have adopted a number of policies to address their growing crisis.

However, their efforts have fallen woefully short, as they fail to include the fundamental reforms necessary to turn the situation around. Meanwhile domestic pressures, as well as international concerns, continue to mount.

Development Run Amok

China's water story begins with a challenging reality: The country's per capita water resources just exceeded more than one-quarter that of the world average, and the distribution of those resources throughout the country is highly uneven.

Northern China is home to approximately 40 percent of the country's total population and almost half its agricultural land, and produces more than 50 percent of GDP. But it receives only 12 percent of total precipitation. Southern China, in contrast, receives 80 percent of China's total precipitation, yet skyrocketing levels of water pollution dramatically reduce the south's natural advantage.

The spectacular economic growth that has made China the envy of the world has only exacerbated the challenge. Resources, particularly water, are consumed without consideration for future demand. Industry and agriculture are notoriously profligate water consumers: Industry, which accounts for about one-quarter of China's total water consumption, uses anywhere from four to 10 times more water per unit of GDP as other competitive economies.

Water used for energy is a singularly important drain on China's scarce resources. By far, the largest portion of China's industrial water use is devoted to energy: The process of mining, processing and consuming coal alone accounts for almost 20 percent of all water consumed nationally. Hydropower raises the bar even further.

Already the largest producer of hydropower in the world, China plans to triple hydropower capacity by 2020. According to Ma Jun, the director of the Chinese NGO Institute of Public and Environmental Affairs, many Chinese rivers simply won't be running in 2020 if China meets its hydropower capacity goals.